Ex-regulator and former pensions boss Christine Farnish is hoping to clinch two things this year: the first is a cup victory for Spurs as they battle through their best season in recent memory. “I’m just so nervous,” she said. “It’s good to see the running is unpredictable this year.”

Her second goal is in the equally unpredictable world of financial services: she wants Britain’s biggest peer-to-peer firms to win over consumers, as well as the City watchdog, to finally offer approved and regulated financial products.

“Peer-to-peer is less risky than the stock market where you can lose all your capital if you’re not careful”

Christine Farnish

As chief executive of the peer-to-peer finance association (P2PFA), Ms Farnish is the voice of an industry that has lured millions of savers in their hunger for higher investment returns – but also unremitting criticism from financial heavyweights.

Lord Adair Turner, the former FCA chief, has joined a chorus of financiers predicting huge losses for peer-to-peer. He said the worst types of investment bankers would look like “lending geniuses” compared with peer-to-peer websites, accusing them of haphazard lending.

Despite their alarm, the biggest websites – including Zopa, Funding Circle and Ratesetter – have been able to lend out £5.1bn of ordinary people’s cash by virtue of their “interim” FCA approval.

They are effectively online middle-men, taking people’s money to lend out to others with interest added, in the form of unsecured loans, business loans or mortgages.

But high-profile failures such as the smaller lender TrustBuddy, a Europe-wide platform that opened for business in Britain last year, have cast doubt on the fledgling industry, which Ms Farnish insists “prides itself” on managing credit risk. It’s perhaps a surprise, however, that the face of an unregulated, unapproved industry should be an ex-regulator herself.

Lord Adair Turner, the former FCA chief, has joined a chorus of financiers predicting huge losses for peer-to-peerCredit:
Julian Simmonds

Ms Farnish, 66, began as a consumer boss at the now-defunct Financial Services Authority, joining from the telecoms watchdog Oftel in 1998.

For four years, she dealt with pensions mis-selling – the PPI of its day – as well as helping to set up a free-to-use dispute resolution body for consumers, the Financial Ombudsman Service.

Brighton-based Ms Farnish later became the highly influential chief executive of the National Association of Pension Funds – one of the most rigidly regulated industries in the City.

“There was a front page story a day on pensions and it was a tough time,” she said. “Schemes were closing while holes and deficits were emerging.”

Her CV lends veneer of respectability to the upstart industry. She is is a peer-to-peer investor herself – “not a vast amount, but to try it” – and has spearheaded the industry’s defence against the doomsayers.

She hit back at “misinformed” criticis, including Lord Turner’s claims of irresponsible lending. “We only lend to creditworthy customers and apply strict credit underwriting rules to all our members.”

And the evidence says that industry-wide default rates are around 3pc, in line with the proportion of unsecured loans issued by banks that go bad.

Peer-to-peer, she said, is “less risky than the stock market where you can lose all your capital if you’re not careful.” The P2PFA, which represents 90pc of the industry by assets, imposes minimum rules on platforms. To join, platforms must have been in business for six months and demonstrate they are only accepting responsible borrowers.

Take Zopa, which is the oldest website and has survived the financial crisis. It said just 16 loans out of every 1,000 in the past two years were either late or have gone bad.

But even the pensioner of peer-to-peer, which has lent out £1.4bn to date, is facing a glut of lenders hungry for 5pc returns you can’t find at the bank. The company used to accept just 1pc of borrowers – and now takes on 20pc to keep up with demand.

Zopa is the oldest of the P2P websites and survived the financial crisis

Websites have begun to take on higher-risk borrowers in a bid to keep interest rates up. But they argue that their criteria was already incredibly strict. This means that lenders’ money is put to work more quickly, but also that investors are less likely to get their money back.

But with such low defaults and bumper rates of return, banks are hoping to cash in on the peer-to-peer boom. RBS and Santander have both struck deals with peer-to-peer websites in recent years while Metro Bank, a self-styled “challenger” to the Big Four, tied up with Zopa in 2015 to lend some of its deposits on their website.

This year the Government included the asset class in a raft of tax breaks designed to appease savers, particularly those who have had their cash eroded by years of record-low interest rates.

“We’re the Google generation of financial services”

Christine Farnish

As of April, peer-to-peer investing has become tax-free for most. The new “personal savings allowance” means basic-rate taxpayers can earn £1,000 in peer-to-peer returns before there is tax to pay, with this figure trimmed to £500 for higher-rate earners.

On top of this, peer-to-peer returns are now eligible for inclusion in an Isa, pitting them against bank deposits or stocks and shares.

The sea change in policy is a major boost to the sector which has battled for recognition alongside “mainstream” asset classes.

But there’s a catch. Not one of the P2PFA’s members have been approved by the FCA and have missed the April 6 day when peer-to-peer Isas came into force.

“It hasn’t come as a surprise,” said Ms Farnish, “we knew the FCA was struggling because it is dealing with literally thousands of consumer credit authorisations.”

The FCA failed to form a “single team” to consider and approve peer-to-peer platforms, she said. “It’s all been a very odd process.”

A quirk in the rules means that the bigger and older firms – including all eight members of the P2PFA - are still waiting for approval while smaller, less-established websites are already authorised.

The Financial Conduct Authority took over regulating the consumer credit industry from the Office of Fair Trading in April last year.

As a result, the watchdog gave platforms already approved during the dying days of the OFT an “interim” permission, so they could keep selling credit.

Now, the FCA is ploughing through their application for full permissions so they can offer Isas, with 86 firms awaiting a decision - of which 44 already have interim permission.

Energy investor Abundance is the biggest unheard-of platform that is already fully regulated

Abundance, which invests in energy projects, is the biggest while other names include Edaid, which sells unsecured loans to students, and “Go2” offering business loans. All are able to offer Isas – but represent less than 10pc of the industry.

Another, Resolution Compliance, isn’t offering an Isa at all but lets unapproved firms piggyback on its FCA approval. Founder James Dingwall said that 37 firms have approached the company to be so-called “appointed representatives”, so they can offer their own Isas, but that all but two of then have been turned away.

“We like to stick with basic models and many were too complex for what we like to accept,” Mr Dingwall said.

Meanwhile the Zopas of the industry have been “put to the back of the queue,” said Ms Farnish. “The FCA is being thorough, which is a good thing – but it’s frustrating that it’s taking longer than we’d hoped.”

The regulator said that peer-to-peer remains a “young and innovative market” so firms need to be properly considered before handing out approvals.

Ms Farnish said it “galls us” when peer-to-peer is confused with other forms of alternative finance, such as crowdfunding websites Kickstarter and Indiegogo.

She said peer-to-peer lacks the “completely creaking” software systems of the banks to offer hi-tech credit approval technology. “We’re the Google generation of financial services,” she said. “We’ve got none of the baggage.”